HE 

.C»5t 


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COMMUNICATION 


LELAND   STANFORD, 

Representing  Certain  Railroad  Companies  of  California, 


TO   THK 


Committee  on  Corporations 


LEGISLATURE   OF   CALIFOKNIA 


1876. 


\Z'\[%1j> 


To  the  Honorable,  the  Committee  on  Corporations 
of  the  Assembly  of  the  State  of  California : 

Gentlemen — I  am  advised  that  bills  are  pending  in  the 
Legislature  having  for  their  objects  State  interference  with 
the  management  of  railroads,  and  a  modification  in  essential 
particulars  of  the  statutes  in  pursuance  with  which  corpora- 
tions were  organized  and  are  now  operating  nearly  all  of  the 
railways  within  the  State.  As  the  representative  of  the 
principal  roads  to  be  affected  thereby,  it  will  not  be  regarded 
as  intermeddling  with  that  which  does  not  concern  me,  if  I 
tender  a  few  reasons  why  existing  laws  should  remain  un- 
changed. Before  proceeding,  however,  I  will  call  attention 
to  the  exhaustive  investigations  had  before  the  Committee  on 
Corporations  of  the  Senate  during  the  session  of  1873-4, 
wherein  the  management  of  the  roads  passed  under  most 
searching  review,  and  the  cost  of  transportation  and  travel 
over  the  California  roads  was  compared  with  the  charges  for 
similar  service  over  the  principal  roads  east  of  the  Rocky 
Mountains.  I  also  invite  attention  to  similar  inquiries  made 
by  the  Committees  of  the  session  of  1871-2.  To  the  showing 
heretofore  made  by  the  companies,  in  defense  of  our  position 
and  management,  I  do  not  know  that  I  have  anything  to 
add,  though  I  am  ready  to  respond  to  any  call  of  kindred 
character  that  may  be  made  upon  the  companies. 

The  views  I  now  submit  will  be  general  in  their  character, 
not  as  opposed  to  any  particular  pending  measure,  but  as 


[     2     ] 

questioning  the  power  of  the  Legislature  over  the  subject,  and 
denying  the  expediency  or  wisdom  of  action  thereupon,  if  the 
power  exists.  I  shall  endeavor  to  exercise  perfect  candor, 
and  to  be  logically  correct.  Many  years  active  experience  in 
railway  construction  and  management  have  taught  me,  if  I 
were  otherwise  inclined,  to  respect  the  rights  of  individuals 
severally  as  well  as  collectively,  and  that  it  is  at  all  times  ill- 
advised  and  impolitic  for  persons  or  corporations  to  attempt 
to  maintain  a  position  by  sophistry  or  any  specious  argu- 
mentation. 

All  experience  and  all  history  teach  that  governments  are 
stable  and  beneficent  in  proportion  to  the  security  they  ajfford 
to  life,  liberty  and  property;  that  security  in  the  exercise  of 
the  right  to  acquire  property,  and  its  legitimate  retention  by 
the  lawful  possessor,  is  the  unerring  standard  by  which  the 
value  of  a  government  may  at  all  times  be  tested.  Any  feel- 
ing of  doubt  or  uncertainty  in  regard  to  personal  liberty  or 
the  tenure  of  property,  begets  a  corresponding  lack  of  respect 
for  and  confidence  in  the  State,  and  these  materially  tend  to 
idleness,  wastefulness  and  bad  citizenship. 

Great  undertakings  are  made  successful  through  the  agency 
of  enterprising  citizens  aided  by  commensurate  capital.  The 
larger  ventures,  those  which  usually  result  in  the  greatest 
good  to  the  State  in  developing  her  resources,  assume  such 
proportions  that  no  single  individual  is  willing  to  take  the 
hazards  involved.  Partnerships  have  been  found  inconveni- 
ent and  cumbersome  modes  of  associating  and  managing  a 
large  capital,  and  hence  corporations.  They  seem  to  be  neces- 
sary to  the  execution  of  great  undertakings;  and  the  greater 
the  undertaking  the  more  indispensable  becomes  their  agency. 

The  citizen  in  well  ordered  states  is  guaranteed  in  the  use 
and  enjoyment  of  his  property  according  to  his  own  discretion, 
provided  he  does  not  contravene  public  morals  and  a  sound 


[     3     ] 

police  policy.  The  fundamental  law  will  not  suffer  him  to  be 
divested  of  his  goods  without  due  process  of  law,  nor  disturbed 
therein  without  adequate  compensation.  It  has  been  found 
to  be  both  unwise  and  unjust  to  impose  embarrassing  restric- 
tions upon  the  acquisition  or  use  of  property — unwise  because 
it  takes  away  the  great  incentives  to  industry  and  economy; 
and  unjust  because  its  tendency  is  to  indirect  confiscation. 

Capital  is  permitted  and  invited  to  be  aggregated  for  the 
purpose  of  undertaking  great  improvements — to  faciliate  those 
enterprises  on  which  the  well-being  and  even  the  life  of  the 
State  may  depend.  The  law  permitting  and  encouraging  such 
aggregation,  specifies  the  teims  on  which  it  may  be  done,  the 
•  machinery  by  which  it  may  be  operated,  holds  its  offenders  to 
a  rigid  personal  accountability,  and  has  pledged  the  faith  of 
the  State  that  such  changes  in  the  law  as  would  have  a  tend- 
ency to  render  the  investment  less  secure,  shall  not  be  en- 
couraged or  permitted.  Good  faith  requires  that  associated 
dollars  shall  not  be  made  less  stable  or  less  productive,  by 
any  action  of  the  law,  than  was  contemplated  by  the  law 
when  the  aggregation  was  authorized.  Good  faith  requires 
that  individuals  associated  in  a  common  enterprise  involving 
the  use  of  large  means,  should  stand  on  the  same  plane  of 
security  before  the  law,  that  they  occupied  before  the  com- 
munity of  interests  was  established.  If  new  restrictions  can 
be  imposed  on  corporations,  affecting  them  in  vital  points, 
whereby  the  income  from  their  investments  may  be  cut  down 
from  time  to  time  as  shall  be  dictated  by  caprice,  then  the 
process  may  be  carried  on  until  all  profit  shall  be  stopped, 
which  would  be  confiscation.  And  who  shall  mark  the  line 
dividing  the  right  to  abate  from  productive  capacity,  and  con- 
fiscation? Who  possesses  the  wisdom  requisite  to  so  difficult  a 
problem?  And  why  are  railroad  companies  singled  out  from 
the  great  body  of  corporations  in  this   State  and  made  the 


[     4     ] 

center  of  attack?  Why  is  not  some  distinguished  capitalist 
called  to  the  bar  of  legislative  omnipotence,  and  the  rule  of 
his  business  dealing  prescribed  for  himi  Because  it  would 
be  unjuit  and  unstatesmanlike ;  because  he  would  invoke  in 
his  protection  the  fundamental  principles  upon  which  civilized 
society  rests.  The  gravity  of  this  question  will  be  more 
apparent  when  we  consider  that  there  are  three  hundred  and 
fifty  millions  of  property  created,  and  now  held  by  corpora- 
tions in  this  State — and  that  they  ramify  every  interest.  If  this 
Legislature  shall  deny  by  any  enactment  that  there  are  vested 
rights  in  corporations,  then  I  imagine  that  our  citizens  will 
not  create  new  corporations  nor  invest  in  those  already  or- 
ganized. 

It  will  not  be  denied,  that  for  the  proper  development  of 
the  resources  of  the  State  and  fostering  her  business  interests, 
the  aggregation  of  capital  is  not  only  a  convenience,  but  an 
absolute  necessity.  In  great  enterprises  are  associated  not 
only  capital,  but  to  be  successful,  corresponding  skill  and 
business  talent.  There  is  strength  in  unity  of  purpose,  thought 
and  action,  as  well  as  in  unity  of  wealth.  There  will  not  be 
the  force  of  combined  ability  without  community  of  interest. 
The  rewards  of  industry  ought  to  be  the  same,  whether  the 
citizen  works  his  hands  and  brain  standing  by  himself  or  in 
concert  with  his  neighbors.  Why  should  the  guaranty  of 
protection  be  less  sound  in  the  one  case  than  in  the  other? 
The  State  is  directly  interested  in  the  industry,  skill,  econ- 
omy, and  enterprise  of  her  citizens.  She  is  interested  in  their 
working  and  productive  capacity.  She  reaps  no  profit  from 
drones,  either  in  production  or  character;  on  the  contrary, 
they  form  the  disturbing  element  in  society.  They  challenge 
the  wisdom  of  the  order  of  things  that  brings  success  to  the 
enterprising,  and  clamor  for  the  comnaunistic  era. 

But  it  has  been  said  that  corporations  abuse  their  powers 


[     5     ] 

and  privileges.  In  behalf  of  the  railroad  companies  repre- 
sented by  me,  I  deny  the  statement  emphatically.  Our  roads 
penetrate  many  of  the  populous  centers  of  the  State,  and  we 
deal  largely  with  the  public.  It  would  be  indeed  strange, 
certainly  exceptional,  in  railroad  experience  and  management, 
if  some  persons  with  whom  we  come  in  business  contact,  should 
not  complain  of  fancied  grievances.  It  would  be  too  much  to 
expect  of  human  nature  that  it  should  be  otherwise.  How- 
ever, the  major  part  of  the  complaints  made,  emanate  from, 
and  are  industriously  circulated  by,  persons  who  never  have 
any  occasion  to  deal  with  the  companies,  and  busy  themselves 
in  manufacturing  public  opinion.  But  no  just  grievances  are 
brought  to  the  attention  of  the  management  with  which  I  am 
associated,  that  pass  unredressed — self-interest,  if  there  existed 
no  other  considerations  therefor,  would  establish  such  a  course 
of  action. 

Perhaps  a  foundation  for  justifying  legislative  interference 
with  railway  corporations,  is  predicated  on  the  right  of  emi- 
nent domain,  set  in  motion  for  the  purpose  of  facilitating  the 
construction  of  railroads.  But  this  right  of  eminent  domain 
is  exercised  for  the  benefit  of  the  State — to  facilitate  inter- 
communication between  her  citizens;  to  cheapen  transporta- 
tion and  traveling  expenses;  that  her  resources  may  be  devel- 
oped; that  her  agricultural  and  manufacturing  interests  may 
be  fostered;  that  inducements  may  be  held  out  to  the  people 
of  other  States  to  come  and  cast  their  lot  with  us;  and  tha 
there  may  be  broad  facilities  for  the  rapid  interchange  of  the 
luxuries  and  necessaries  of  civilized  life.  For  the  accomplish- 
ment of  these  objects,  and  in  her  own  interest,  the  State  ex- 
ercises the  right  of  eminent  domain,  but  around  such  exercise 
has  most  carefully  drawn  the  shield  of  the  law  for  the  pro- 
tection of  the  citizen.  The  State  exacts  that  full  compensa- 
tion should  be  made  to  the  citizen  by  the  railroad  company  at 


[     6     J 

whose  instance  he  has  been  compelled  to  surrender  the  use  of 
his  property.  The  citizen  whose  property  is  thus  taken  from 
him  by  legal  force,  makes  no  contribution  to  railroad  construc- 
tion— ^he  is  paid  by  the  corporation  the  full  equivalent  for  the 
use  of  his  property.  If  it  is  otherwise,  it  is  the  fault  of 
legislation.  The  right  granted  to  the  railway  is  a  privilege — 
or  necessity — for  which  the  company  makes  ample  recom- 
pense, in  obedience  to  the  law. 

But  in  proportion  to  the  number  of  miles  of  railroads  con- 
structed in  this  State,  the  right  of  eminent  domain  has  been 
seldom  exercised.  A  very  large  percentage  of  our  roadbeds 
and  depot  grounds  has  been  obtained  by  negotiation  with  the 
owners  of  the  property  necessary  to  be  taken.  If  it  be  said 
that  this  percentage  is  largely  due  to  the  concession  of  the 
right  of  way  through  the  public  lands  granted  by  Congress, 
then  I  answer  that  such  grant  by  Congress  was  upon  the  con- 
dition of  certain  enumerated  services  to  be  rendered  by  the 
companies  to  the  United  States,  which  is  only  another  mode 
of  making  compensation. 

If  the  property  of  corporations,  or  any  class  of  corpora- 
tions, is  to  be  subjected  to  this  depreciating  process  at  the 
will  of  the  Legislature,  why  not  make  compensation,  as  in  the 
case  of  the  taking  of  the  property  of  the  citizen?  I  do  not 
deny  that  the  State  may  condemn  the  property  of  railroad 
corporations;  on  the  contrary,  my  position  is,  that  it  may  do 
so,  but  not  without  compensation,  as  seems  to  be  the  theory 
with  some.  In  other  words,  I  maintain  that  any  change  in 
the  law  which  has  the  effect  to  make  money  invested  in  rail- 
roads less  valuable,  less  remunerative  than  it  might  or  could 
be  under  the  law  as  it  stood  at  the  inception  of  the  corpora- 
tion, is  condemnation  without  compensation,  in  proportion  to 
the  extent  to  which  it  is  carried. 

But  assuming  that  the  constitutional  power  exists  in  the 


[    7    ] 

Legislature  to  regulate  and  control  railroad  companies,  which 
I  do  not  concede,  is  it  wise,  expedient,  or  necessary  to  do  so 
at  the  present  time  ?  The  railway  system  of  the  State  is  far 
from  being  completed.  The  trunk  lines  are  being  advanced 
as  rapidly  as  possible — more  rapidly,  I  think  I  am  justified  in 
stating,  than  the  public  anticipated.  This  is  particularly  note- 
worthy, when  we  consider  the  damaging  blows  that  have  been 
aimed  at  railway  construction  and  management,  reaching  in 
their  effects  every  quarter  of  the  globe.  Through  the  preju- 
dices of  the  people,  appealed  to  often  for  ephemeral  ends, 
railroad  credit  has  passed  through  a  period  of  suspension, 
greatly  to  the  injury  of  California.  Still  railroad  construction 
has  made  annual  progress ;  and  since  the  last  meeting  of  the 
Legislature  about  four  hundred  miles  have  been  added  to  the 
roads  of  this  State.  We  are  now  seeking  to  push  the  South- 
ern Pacific  far  enough  to  the  southeast  to  bring  the  productive 
provinces  of  Arizona  and  New  Mexico  into  close  connection 
with  our  commercial  cities. 

Experimental  surveys  for  branch  lines  have  been  made  and 
are  being  made,  designed  to  penetrate  some  of  the  richest 
districts,  now  comparatively  inaccessible  and  unproductive. 
These  are  not  projected  to  mislead  or  beguile  the  public.  They 
are  conceived  with  a  view  to  their  early  execution. 

Thousands  of  laborers  now  find  employment  in  railroad 
construction  and  thousands  in  operating  completed  roads.  As 
the  system  develops,  large  additional  numbers  will  be  required. 

Within  the  past  two  years  no  State  in  the  Union  has  ac- 
complished so  much  as  California  to  develop  and  utilize  the 
slumbering  riches  of  the  commonwealth.  Apart  from  the 
values  railroads  add  to  the  State  in  and  of  themselves,  as 
they  advance,  the  properties  of  the  citizens  multiply  ten  and 
twenty  fold.  Hundreds  of  thousands  of  acres  that  five  years 
ago  were  only  valuable  as  cattle  and  sheep  ranges,  and  this 


[     8     ] 

was  the  measure  of  their  value,  are  now  appropriated  to 
cereals,  give  a  steady  reward  to  industry,  and  homes,  sur- 
rounded with  the  comforts  of  civilization,  to  thousands  of  good 
citizens.  The  tide  of  settlement  has  and  will  keep  pace  with 
the  advance  of  railroad  construction.  The  prosperity  of  the 
State  has  and  will  keep  pace  with  both.  Unfriendly  legisla- 
tion ought  not  to  check  enterprises  productive  of  such  results 
to  the  State.  Its  effects  would  be  to  intimidate  capital  and 
cripple  industry;  destroy  credit  and  confidence  both  at  home 
and  abroad,  and  to  create  a  feeling  of  insecurity  fatal  to  all 
great  undertakings. 

To  these  considerations  so  briefly  set  forth,  and  kindred 
ones  that  will  be  so  readily  suggested  to  the  reflecting  mind, 
I  most  respectfully  invite  the  serious  attention  of  the  Legis- 
lature. 

My  purpose  in  this  communication  is  to  present  a  few  funda- 
mental propositions,  which  may  be  condensed  as  follows  : 

First — That  the  benefits  to  the  State  flowing  from  railroad 
construction  vastly  exceed  any  advantages  that  can  possibly 
accrue  to  the  companies,  by  the  creation  of  wealth,  by  aiding 
to  develop  our  mineral,  mechanical  and  agricultural  resources, 
and  by  rendering  communication  between  remote  districts 
more  rapid  and  inexpensive. 

Second — That  it  is  not  for  the  interest  of  the  State  to  at- 
tach embarrassing  restrictions  upon  the  use  of  capital, 
whether  under  the  control  of  one  or  an  association  of  her 
citizens. 

Third — That  there  are  enterprises  indispensable  to  the  full 
development  of  the  material  interests  of  the  State,  that  as- 
sume such  proportions  that  they  cannot  be  carried  out  with- 
out the  use  and  aggregation  of  large  sums  of  money. 

Fourth — That  such  aggregation  has  been  found  by  expe- 
rience to  be  necessary  to  build  up  and  maintain  a  railway 


[     9     ] 

system  commensurate  with  the  natural  wealth  of  the  State; 
and  hence  the  Legislature  has  authorized  the  incorporation  of 
companies,  in  pursuance  with  which  the  existing  railroad  com- 
panies were  organized. 

Fifth — That  the  State,  recognizing  the  great  advantages  to 
accrue  to  herself  through  the  agency  of  transportation  and 
traveling  facilities,  permits  private  property  to  be  condemned 
and  used  by  the  railroad  companies,  they  paying  the  full 
equivalent  therefor. 

Sixth — That  the  interests  of  the  railroad  companies  are  so 
intimately  connected  with  and  dependent  lipoii  the  conven- 
ience and  prosperity  of  the  people,  that  they  must  subserve 
the  public  good  to  assure  their  own  success. 

But  it  has  been  said  that  the  freights  and  fares  charged  on 
the  roads  in  California  are  exorbitant,  extortionate,  and  that 
improper  discriminations  are  practiced.  Without  entering 
into  details  on  this  subject,  or  assuming  the  defensive  in  this 
communication,  I  undertake  to  say,  and  am  prepared  to  main- 
tain: 

First — That  the  average  cost  of  transportation  and  travel 
over  the  railroads  in  this  State  is  no  greater  than  is  charged 
on  any  of  the  first-class  roads  on  this  continent,  when  the  cir- 
cumstances afiecting  the  business  of  railroads  are  fairly  con- 
sidered. 

Second — That  the  average  cost  of  transportation  in  Cali- 
fornia is  3  66-100  cents  per  ton  per  mile,  which  is  11  34-1001 
cents  per  ton  per  mile  less  than  the  law,  as  it  now  stands, 
authorizes  our  companies  to  charge. 

Third — That  we  have  endeavored  to  discriminate  in  favor 
of  the  mineral,  agricultural  and  mechanical  products  of  this 
coast. 

Fourth — That  there  are  certain  expenses  denominated  fixed 
expenses,  such  as  interest,  salaries,  the  general  cost  of  ope- 


C  10   ] 

rating  roads,  etc.,  which  must  be  provided  for  from  the  earn- 
ings of  the  roads;  and  if  the  maximum  now  allowed  by  law 
be  reduced,  and  be  held  to  be  binding,  it  would  be  necessary 
to  reduce  the  present  rates  charged  on  importations  and  lux- 
uries, and  advance  them  on  the  mineral,  mechanical,  and  agri- 
cultural productions  of  the  country.  A  certain  average  must 
be  reached,  or  the  roads  must  suspend  business. 

Respectfully  submitted. 

Leland  Stanford. 
January,  1876. 


To  the  Honorable,  the  Committee  on  Corporations 
of  the  Senate  of  the  State  of  California. 

Gentlemen — I  have  already  made  a  communication  to  the 
Committee  on  Corporations  of  the  Assembly,  setting  forth, 
somewhat  at  length,  reasons  why  there  ought  not  to  be  any  leg- 
islation which  would  materially  affect  the  rights  of  corpora- 
tions organized  under  existing  laws;  to  this  I  respectfully 
invite  your  attention,  and  now  beg  leave  to  submit  substan- 
tially the  same  views  more  briefly. 

New  legislation  that  would  materially  change  existing  laws 
to  the  detriment  of  property  existing  thereunder,  necessarily 
assumes  that  corporations  pei'  se  have  no  vested  rights ;  it  also 
assumes  that  the  property  of  the  corporation,  and  conse- 
quently the  property  of  the  citizens  of  the  State  who  own  in 
corporations,  may  be  taken  in  whole  or  in  part,  without  com- 
pensation. The  vast  amount  of  wealth  created  and  held  by 
corporations  in  this  State  naturally  chailenges  attention  to  a 
subject  so  important. 

Before  the  enactment  of  general  incorporation  laws,  corpo- 
rations were  created  by  special  acts,  and  necessarily  had  ex- 
clusive privileges,  and  often  became  odious  monopolies.  The 
necessity  for  corporations  has  been  long  acknowledged,  but 
the  making  of  them  available  to  all  persons  who  desired  to 
associate  themselves  together  in  a  convenient  form  for  the 
purpose  of  embarking  in  any  undertaking,  is  of  more  modern 
invention,  and  has  relieved  corporations  of  the  odious  features 


.L    12    ] 

of  monopoly.  If  it  shall  now  be  established  that  there  are 
no  vested  rights  in  corporations,  then  their  agency  will  go  into 
disuse.  They  seem  inseparable,  in  this  age  of  progress,  from 
the  development  of  the  business  and  resources  of  the  country. 
Common  law  partnerships  are  insufficient  to  meet  the  various 
demands  of  business.  Our  general  incorporation  laws  impose 
upon  the  public  no  monopoly,  because  they  are  open  to  all, 
and  afford  a  more  convenient  agency  for  the  transaction  of 
business  than  partnership.  The  property  of  the  corporation 
is  still  the  property  of  individual  citizens  as  much  as  though 
it  was  invested  in  an  ordinary  partnership.  Why  should  this 
property,  the  result  of  the  enterprise  of  the  citizen,  be  less 
secure  in  the ^ one  case  than  in  the  other?  Why  should  the 
one  class  be  denied  the  rewards  of  industry,  of  economy,  of 
foresight  and  enterprise,  more  than  the  other?  Is  not  the 
State  equally  interested  to  protect  alike  all  citizens  in  their 
persons,  their  property,  and  their  legitimate  pursuits'?  The 
State  is  composed  of  a  community  of  citizens,  all  of  whom  are 
interested  that  each  citizen  shall  employ  his  time  in  such 
legitimate  pursuit  as  shall  yield  to  him,  and  consequently  to 
the  community,  the  greatest  reward;  and  the  success  which 
attends  his  efforts  is  marked  evidence  of  how  far  he  supplies 
an  immediate  want.  To  limit  the  profits  which  the  citizen, 
whether  a  mechanic,  merchant,  agriculturist,  public  carrier,  or 
when  engaged  in  any  other  pursuit,  may  derive  from  his  busi- 
ness, must  operate  primarily  as  a  discouragement  to  his  energy, 
because  it  fixes  a  restriction  upon  his  productive  capacity. 
Laws  aiming  to  regulate  the  affairs  of  individuals  are,  to  a 
certain  extent,  attempts  to  control  the  property  of  the  indi- 
vidual without  his  concurrence,  and  probably  to  his  injury — 
control  being  the  essence  of  ownership — and  any  legal  regula- 
tions that  pass  beyond  the  absolute  necessities  of  police  pur- 
poses are  in  conflict  with  the  fundamental  principles  of  our 


[    13    ] 

government ;   the  State  is  interested  in  the  uses  made  of  the 
time,  the  energies,  and  the  property  of  its  citizens.  ^: 

The  idler  is  a  loss  to  the  State  to  the  extent  of  the  capacity 
he  has  for  production,  but  which  remains  unemployed.  This 
is  most  manifest  to  his  immediate  neighbors  to  whom  he  could 
be  of  most  service.  The  State  is  also  interested  in  the  mer- 
chant, the  farmer,  the  manufacturer,  indeed  in  the  legitimate 
business  of  all  of  her  citizens,  but  she  does  not  undertake 
either  to  prescribe  the  rules  for  the  management  of  their 
business,  nor  fix  a  limit  upon  the  profits  to  accrue  therefrom. 
Enterprise  should  not  only  be  left  open  to  the  citizen,  but  he 
should  be  encouraged  therein;  and  it  will  be  found  in  all 
countries  where  restrictions  and  embarrassments  are  imposed 
upon  the  people,  that  thei^e  the  average  condition  is  much 
lower  than  in  those  countries  where  enterprise  has  a  more 
open  field  for  its  development.  Then  can  there  be  any  wis- 
dom in  making  a  distinction  between  citizens  associated  under 
the  general  incorporation  laws  and  those  not  so  associated? 
Wherein  is  the  business  of  one  class  less  legitimate  and  less 
entitled  to  protection  than  that  of  the  other?  Does  the  State 
give  to  corporations  as  such,  by  the  law  authorizing  their 
members  to  associate  in  a  corporate  capacity,  anything  but 
the  advantages  of  organization  and  existence  under  a  law  con- 
ceived in  wisdom  and  fruitful  to  meet  the  wants  and  neces- 
sities of  civilization  and  modern  expansion?  If  not,  then 
whence  comes  the  reason  for  an  exceptional  interference  with 
and  regulation  of  the  rights  of  property  of  these  citizens? 
Why  not  hold  out  to  them  as  to  others,  the  same  favorable 
inducements,  and  hope  that  their  economy,  industry,  foresight 
and  enterprise  shall  reap  their  just  reward  ?  It  seems  to  me 
I  might  well  stop  here  and  await  answers  to  these  propositions ; 
but  inasmuch  as  the  public  attention  has  been  more  particu- 
larly directed  to  the  specific  class  of  corporations  known  as 


[    14    ] 

railroad  corporations,  the  inquiry  naturally  is  suggested: 
"Why  is  it  that  this  more  serious  attempt  is  made  to  inter- 
fere in  the  management  of  their  affairs  than  with  that  of  other 
corporations  ?  To  my  mind,  an  answer  would  be  found  in 
that  railroads  seem  to  be  more  largely  beneficial  in  their  in- 
fluences, more  largely  supplying  a  want,  and  I  may  say  a 
necessity,  for  the  varied  and  often  conflicting  transactions  of 
life  than  other  corporations. 

The  companies  deal  largely  with  the  public;  have  transac- 
tions with  every  degree  of  intelligence,  involving  amounts 
within  the  means  of  the  humblest,  as  well  as  the  wealthiest 
citizen;  the  roads  have  become  as  much  a  public  necessity  as 
a  convenience. 

But  perhaps  this  legislative  discrimination  against  railroad 
corporations  is  assumed  more  especially  because  of  the  exer- 
cise of  the  right  of  eminent  domain  by  the  State  for  the  pur- 
pose of  permitting  their  construction;  but  this  right  is  not 
exercised  for  the  benefit  of  these  corporations,  but  for  that  of 
the  State.  Under  the  fundamental  law,  the  property  of  "A," 
cannot  be  taken  for  the  benefit  of  "B."  The  powers  of  emi- 
nent domain  under  which  the  property  of  the  citizen  may  be 
taken,  can  only  be  exercised  for  the  benefit  of  the  State,  and 
then  only  upon  just  compensation  being  made.  After  the 
exercise  of  this  right  and  payment  has  been  made  by  the 
railroad  company,  and  the  road  constructed,  the  individuals 
who  avail  themselves  of  its  use  are  the  same  persons  for  whose 
benefit  the  property  of  "A"  was  taken  by  the  State  and  paid 
for  by  the  railroad  company.  Now,  when  these  patrons  of 
the  railroad  desire  to  enjoy  the  use  of  the  property,  which  was 
taken  from  "A"  by  the  State  and  paid  for  by  the  railroad 
company,  together  with  that  which  the  company  had  added 
thereto,  why  should  not  they  make  compensation  commensur- 
ate therewith.     Will  any  one  pretend   that  the  reducing  of 


[    15    ] 

income  is  not  the  taking  of  property.  The  producing  capacity 
of  property  determines  its  value.  I  do  not  argue  against  the 
right  of  the  State  to  take  the  property  of  railroad  corporations 
for  a  public  use  on  the  terms  that  it  takes  the  property  of 
other  citizens,  but  I  claim  that  citizens  composing  a  railroad 
corporation  shall  hold  their  property  as  sacred  from  confisca- 
tion as  under  the  law  other  citizens  hold  theirs. 

But  assuming  that  there  exists  the  right  for  the  exercise  of 
control  over  railroads  different  from  that  exercised  over  indi- 
viduals, or  other  corporations,  is  it  wise  to  do  so  at  the  time 
when  the  railroad  system  of  the  State  is  far  from  being  com- 
pleted; when  railroad  credit,  lately  so  seriously  impaired,  is 
recovering;  when  there  is  no  just  cause  of  complaint  of  the 
management  of  the  roads ;  when,  in  fact,  the  average  charges 
for  business  upon  the  roads  is  less  than  one-fourth  of  the 
maximum  allowed  by  the  laws  authorizing  their  creation,  and 
on  the  faith  of  which  they  were  organized;  when,  as  has  been 
repeatedly  demonstrated  before  various  committees  of  the 
Legislature  of  the  State,  a  fair  consideration  of  the  circum- 
stances afiecting  the  business  of  railroads  being  given,  the 
cheapest  railroading  in  the  United  States  is  here  in  Califor- 
nia'? If  legislative  control  over  these  railroad  corporations  is 
to  be  insisted  upon  as  just  and  necessary,  then  their  enterprise 
is  not  legitimate;  their  investors  have  made  a  mistake,  and 
should,  were  it  possible,  withdraw  their  property  and  place  it 
where  its  right  to  enhancement  would  be  unquestioned,  and 
the  profits  from  its  use  be  encouraged  by  their  fellow  men ; 
and  it  is  a  mistake  to  suppose  that  the  public  benefit  of  rail- 
roads is  sufficient  to  justify  the  State,  in  her  exercise  of  emi- 
nent domain,  to  promote  their  construction.  No  calling  is  or 
will  be  safe  that  is  to  excite  the  ceaseless  effort  at  control  of 
those  who  do  not  own  in  it,  and  the  State  must  pronounce 
against  its  pursuit. 


[    16    ] 

If  the  positions  taken  in  the  foregoing  cannot  be  contro- 
verted— and  to  their  close  investigation  I  invite  the  attention 
of  the  Committee,  and  also  of  the  public  press  of  the  State — 
then  wherein  can  be  shown  any  justification  for  legislation  on 
the  subject? 

It  is  no  answer  to  say  that  the  people  have  otherwise  in- 
structed their  Bepresentatives,  because  the  people  do  not 
exact  or  desire  that  any  wrong  or  injury  shall  be  inflicted  upon 
any  citizens,  nor  any  class  of  citizens,  nor  that  there  should  be 
unjust  legislative  discrimination. 

Respectfully  submitted. 

Leland  Stanford. 
January,  1876. 


Gay  lord  Bros.      ■ 

^^^^^■1 

PP9 

Makers               ■ 

^^^^^^^^K 

J.  .:;     ,- 

Syracuse,  N.  Y.    ■ 

uniffii^ 

^-    ^A 

PAT.  JAN.  21,  1908          ■ 

m-Ml^ 

A 


#^ 


W' 


